US Explores Ways to Extend Subsidies to EU-Made EVs

The Biden government may permit companies in Europe to take part in United States tax subsidies in billions of dollars for electric vehicles if the two sides can reach a trade agreement in the coming weeks. According to a senior government official, this decision could help reduce a significant source of tension between the two continents.

The United States and the European Union have had weeks of discussions but haven’t yet agreed on ways to include European carmakers in such incentives. However, continuing negotiations might result in a deal that would let cars that contain minerals from Europe be eligible for the totality of the tax advantages.

The negotiations address one of the major conflicting elements of the expansive climate bill signed by President Joseph Biden in 2022. This law aims to tackle climate change by promoting the use of energy free of carbon while also generating numerous jobs in the manufacturing and mining sectors in the United States. The local content requirements in the climate law have long angered European officials, who claim this would essentially bar their vehicles from the rapidly expanding American market.

The carmakers are anxiously expecting the Treasury advice regarding the $7,500 tax credit for each vehicle as a means of accomplishing Biden’s objective of ensuring that electric vehicles account for 50% of total sales of new vehicles in 2030. Biden’s pledge to customers to assist in lowering the price of EVs might be fulfilled by permitting different kinds of automobiles to be eligible for the tax benefits.

Nevertheless, retaining access to suppliers from the European Union may enrage some local automakers as well as American mining companies and battery producers that believe that the American climate law provisions are essential for developing a domestic renewable energy supply chain.

Details regarding the way the agency wants to evaluate the mining and refining of minerals utilized in EVs and their parts will be spelled out in revised Treasury guidelines on the tax breaks that will be released in the weeks to come. The official stated that the original version did not include minerals that were extracted and refined in Europe.

If the United States and European Union can effectively finalize those negotiations, then the EU could be awarded an exceptional free trading partnership status for key minerals within the climate bill, an idea that was first laid out in a white paper released by the Treasury toward the end of 2022. There is currently no free trade agreement between the two continents.

EV manufacturers such as Lucid Motors (NASDAQ: LCID) will be following those discussions since any agreement reached could have major impacts on the auto industry for decades to come.

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